Editorial: The 75k buzz

This week, the Sensex hit the 75,000-mark leaving the bourses breathless in our poll-bound nation. There are 60-odd countries entering the election fray this year and India has outperformed many on the growth front, including the BRICS bloc. It has ticked the right boxes — investor confidence, positive sentiments, fiscal stability, backed by a conducive policy milieu. India is bracing to topple Japan and emerge as the third largest economy by 2030 with a $5 trillion dream, right behind the US and China. The target seems within grasp as India breached the $2 trillion and $3 trillion mark over two consecutive seven-year spans. This pace of growth has propelled us to overtake France and Germany and occupy the fifth spot globally with a GDP of $3.7 trillion in FY24.

It is momentous to see India’s ascent — 60 years after independence, it hit the $1 trillion GDP threshold up from $130 billion in 1979, when the Sensex hovered around 100 points. As many as 900 points were added to the Sensex between 1979 and 1990, followed by the grand 5,000 and 10,000 mark milestones in 1999 and 2006 respectively. But it is the subsequent period that has shown resilience of the economy as the Sensex literally doubled — from 25,000 points in 2014 to 50,000 in 2021.

So, what’s fuelling the upswing? Pundits say corporate India has done well, with the transparency and regulatory framework occupying centrestage. The startups and the growing number of unicorns have also done their bit, not to mention, those dipping into the IPO basket. The market cap of Rs 400 lakh crore was made possible thanks to stellar financials reported across the board. The pre-pandemic era saw the addition of 3.5 lakh demat accounts every month. That figure has jumped up over tenfold to 30 lakh new accounts per month. The days of parking funds in risk-averse instruments aka fixed deposits, that come with a guaranteed interest are long gone. That perhaps explains the explosion of demat accounts, which have gone up from 40 million in March 2020 to 150 million today.

Investment in shares and mutual funds through SIPs have caught the attention of retail investors. The monthly mutual fund SIP inflows have surged from Rs 8,000 crore five years ago to Rs 19,000 crore now. Analysts reckon the Sensex could touch the 1,00,000 mark in under five years. Having said that, there is a reason to be cautious. A global country risk research company said on Tuesday that it might be too soon to celebrate India’s shining statistics going by the 8.4% GDP growth reported for the Oct-Dec quarter.

The bane of unemployment as well as the dismal figures on the female labour force participation rate have bogged down real growth on multiple metrics. Private consumption remains a perpetual pain point as net savings have been lower than in the run-up to the COVID-19 years. The forecast is that GDP growth could slow down to 6.5% in 2024-25 from an estimate of 7% in the last fiscal year. There are also apprehensions pertaining to the majoritarian tilt of the government, with the implementation of the Citizenship Amendment Act looming in the background, which could be seen as a thorn in the side of social stability, something that is essential for business to boom. India Inc might be tempted to overstay its welcome at the bourses but it’s essential we stay the course, and make corrections where necessary.